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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-39898

DrivenBrandsLogo_Positive.jpg

Driven Brands Holdings Inc.
(Exact name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)
47-3595252
(I.R.S. Employer Identification No.)
440 South Church Street, Suite 700
Charlotte, North Carolina
(Address of principal executive offices)
28202
(Zip Code)
Registrant’s telephone number, including area code: (704) 377-8855

Title of each class
Common Stock, $0.01 par value
Trading Symbol
DRVN
Name of each exchange on which registered
The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
Non-accelerated filer ☐
Accelerated filer ☐
Small reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of November 6, 2023, the Registrant had 163,959,225 shares of Common Stock outstanding.


Driven Brands Holdings Inc.
Table of Contents
Page
PART I. FINANCIAL INFORMATION
PART II. OTHER INFORMATION


Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, trends, plans, objectives of management, impact of accounting standards and guidance, impairments, and expected market growth are forward-looking statements. In particular, forward-looking statements include, among other things, statements relating to: (i) our strategy, outlook, and growth prospects; (ii) our operational and financial targets and dividend policy; (iii) general economic trends and trends in the industry and markets; (iv) the risks and costs associated with the integration of, and or ability to integrate, our stores and business units successfully to achieve anticipated synergies; (v) the proper application of generally accepted accounting principles, which are highly complex and involve many subjective assumptions, estimates, and judgments; and (vi) the competitive environment in which we operate. Forward-looking statements are not based on historical facts, but instead represent our current expectations and assumptions regarding our business, the economy and other future conditions, and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. It is not possible to predict or identify all such risks. These risks include, but are not limited to, the risk factors that are described under the section titled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 as well as in our other filings with the Securities and Exchange Commission, which are available on its website at www.sec.gov. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
Forward-looking statements represent our estimates and assumptions only as of the date on which they are made, and we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

2

Part I - Financial Information
Item 1. Financial Statements (Unaudited)
DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months EndedNine Months Ended
(in thousands, except per share amounts)September 30, 2023September 24, 2022September 30, 2023September 24, 2022
Revenue:
Franchise royalties and fees$47,362 $45,562 $140,682 $128,300 
Company-operated store sales389,041 341,211 1,159,685 957,487 
Independently-operated store sales43,582 40,469 157,647 158,500 
Advertising contributions27,121 22,018 73,547 63,807 
Supply and other revenue73,928 67,334 218,791 185,447 
Total revenue581,034 516,594 1,750,352 1,493,541 
Operating Expenses:
Company-operated store expenses262,282 209,562 762,731 580,368 
Independently-operated store expenses25,773 23,254 87,095 85,396 
Advertising expenses27,121 22,018 73,547 63,807 
Supply and other expenses38,816 41,042 118,188 109,616 
Selling, general, and administrative expenses123,012 82,460 332,155 272,657 
Acquisition related costs1,667 2,325 7,264 9,981 
Store opening costs1,372 753 3,774 1,925 
Depreciation and amortization45,639 36,518 129,256 107,628 
Goodwill impairment850,970 — 850,970 — 
Trade name impairment— — — 125,450 
Asset impairment charges and lease terminations111,239 2,894 117,450 2,910 
Total operating expenses1,487,891 420,826 2,482,430 1,359,738 
Operating (loss) income (906,857)95,768 (732,078)133,803 
Other expenses, net:
Interest expense, net41,292 27,323 120,304 78,946 
Loss on foreign currency transactions2,980 15,582 3 30,490 
Other expense, net44,272 42,905 120,307 109,436 
(Loss) income before taxes(951,129)52,863 (852,385)24,367 
Income tax (benefit) expense (151,818)14,472 (120,572)8,592 
Net (loss) income(799,311)38,391 (731,813)15,775 
Net loss attributable to non-controlling interest— — — (15)
Net (loss) income attributable to Driven Brands Holdings Inc.$(799,311)$38,391 $(731,813)$15,790 
(Loss) earnings per share:
Basic$(4.82)$0.23 $(4.40)$0.10 
Diluted$(4.83)$0.23 $(4.41)$0.09 
Weighted average shares outstanding
Basic162,398 162,760 162,698 162,768 
Diluted162,398 166,831 162,698 166,663 



The accompanying notes are an integral part of these unaudited consolidated financial statements.
3

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
Three Months EndedNine Months Ended
(in thousands)September 30, 2023September 24, 2022September 30, 2023September 24, 2022
Net (loss) income$(799,311)$38,391 $(731,813)$15,775 
Other comprehensive income (loss):
   Foreign currency translation adjustments(26,043)(71,063)(8,527)(118,751)
Unrealized (loss) gain from cash flow hedges, net of tax expense (benefit) of $21, $12, $0, and ($14), respectively
(281)8,606 (259)8,513 
Actuarial (loss) gain of defined pension plan, net of tax expense of $0,
(27)5 (15)12 
Other comprehensive loss, net(26,351)(62,452)(8,801)(110,226)
Total comprehensive loss(825,662)(24,061)(740,614)(94,451)
Comprehensive loss attributable to non-controlling interests(13)(15)— (36)
Comprehensive loss attributable to Driven Brands Holdings Inc.$(825,649)$(24,046)$(740,614)$(94,415)






























The accompanying notes are an integral part of these unaudited consolidated financial statements.
4

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except share and per share amounts)
September 30, 2023December 31, 2022
Assets
Current assets:
Cash and cash equivalents$211,280 $227,110 
Restricted cash 657 792 
Accounts and notes receivable, net165,573 179,888 
Inventory83,423 72,040 
Prepaid and other assets42,208 40,084 
Income tax receivable19,641 15,075 
Assets held for sale271,006 — 
Advertising fund assets, restricted63,983 36,421 
Total current assets857,771 571,410 
Other assets42,273 30,561 
Property and equipment, net1,408,970 1,545,738 
Operating lease right-of-use assets1,394,384 1,299,189 
Deferred commissions6,072 7,121 
Intangibles, net741,732 765,903 
Goodwill1,433,775 2,277,065 
Deferred tax assets2,817 2,911 
Total assets$5,887,794 $6,499,898 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable$90,440 $60,606 
Accrued expenses and other liabilities256,347 317,318 
Income tax payable3,546 4,454 
Current portion of long-term debt31,869 32,986 
Income tax receivable liability54,791 53,328 
Advertising fund liabilities38,341 36,726 
Total current liabilities475,334 505,418 
Long-term debt2,877,059 2,705,281 
Deferred tax liabilities141,965 276,749 
Operating lease liabilities1,334,539 1,177,501 
Income tax receivable liability117,915 117,915 
Deferred revenue30,525 30,046 
Long-term accrued expenses and other liabilities29,530 33,419 
Total liabilities5,006,867 4,846,329 
Commitments and contingencies
Preferred Stock $0.01 par value; 100,000,000 shares authorized; none issued or outstanding
— — 
Common stock, $0.01 par value, 900,000,000 shares authorized: and 163,959,225 and 167,404,047 shares outstanding; respectively
1,639 1,674 
Additional paid-in capital1,646,831 1,628,904 
Retained (deficit) earnings(696,938)84,795 
Accumulated other comprehensive loss(71,236)(62,435)
Total shareholders’ equity attributable to Driven Brands Holdings Inc.880,296 1,652,938 
Non-controlling interests631 631 
Total shareholders' equity880,927 1,653,569 
Total liabilities and shareholders' equity$5,887,794 $6,499,898 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
5

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’/MEMBERS’ EQUITY (Unaudited)
Three Months Ended
September 30, 2023September 24, 2022
(in thousands, except share amounts)SharesAmountSharesAmount
Preferred stock, $0.01 par value per share
— $— — $— 
Common stock, $0.01 par value per share
Balance at beginning of period167,366,561 $1,674 167,444,108 $1,674 
Stock issued relating to Employee Stock Purchase Plan56,188 1 31,783 — 
Shares issued for exercise/vesting of share-based compensation awards169,784 1 15,588 — 
Shares repurchased(3,601,694)(36)— — 
Forfeiture of restricted stock awards(31,614)(1)(87,432)— 
Balance at end of period163,959,225 $1,639 167,404,047 $1,674 
Additional paid-in capital
Balance at beginning of period$1,637,945 $1,614,927 
Equity-based compensation expense2,681 5,308 
Exercise of stock options4,737 245 
Stock issued relating to Employee Stock Purchase Plan1,468 — 
Balance at end of period$1,646,831 $1,620,480 
Retained (deficit) earnings
Balance at beginning of period$152,293 $19,006 
Shares repurchased(49,920)— 
Net (loss) income (799,311)38,391 
Balance at end of period$(696,938)$57,397 
Accumulated other comprehensive loss
Balance at beginning of period$(44,898)$(52,796)
Other comprehensive loss(26,338)(62,437)
Balance at end of period$(71,236)$(115,233)
Non-controlling interests
Balance at beginning of period$644 $646 
Other comprehensive (loss)(13)(15)
Balance at end of period$631 $631 
Total shareholders’ equity$880,927 $1,564,949 



















The accompanying notes are an integral part of these unaudited consolidated financial statements.
6

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’/MEMBERS’ EQUITY (Unaudited)


Nine Months Ended
September 30, 2023September 24, 2022
(in thousands, except share amounts)SharesAmountSharesAmount
Preferred stock, $0.01 par value per share
— $— — $— 
Common stock, $0.01 par value per share
Balance at beginning of period167,404,047 $1,674 167,380,450 $1,674 
Stock issued relating to Employee Stock Purchase Plan82,546 1 143,707 1 
Shares issued for exercise/vesting of share-based compensation awards348,087 3 35,788 — 
Share repurchases(3,601,694)(36)— — 
Forfeiture of restricted stock awards(273,761)(3)(155,898)(1)
Balance at end of period163,959,225 $1,639 167,404,047 $1,674 
Additional paid-in capital
Balance at beginning of period$1,628,904 $1,605,890 
Equity-based compensation expense9,730 12,159 
Exercise of stock options6,117 2,431 
Stock issued relating to Employee Stock Purchase Plan2,080 — 
Balance at end of period$1,646,831 $1,620,480 
Retained (deficit) earnings
Balance at beginning of period$84,795 $41,607 
Share repurchases(49,920)— 
Net (loss) income(731,813)15,790 
Balance at end of period$(696,938)$57,397 
Accumulated other comprehensive loss
Balance at beginning of period$(62,435)$(5,028)
Other comprehensive loss(8,801)(110,205)
Balance at end of period$(71,236)$(115,233)
Non-controlling interests
Balance at beginning of period$631 $1,099 
Net loss— (15)
Other comprehensive loss— (21)
Divestiture of Denmark car wash operations— (432)
Balance at end of period$631 $631 
Total shareholders’ equity$880,927 $1,564,949 











The accompanying notes are an integral part of these unaudited consolidated financial statements.
7

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Nine Months Ended
(in thousands)September 30, 2023September 24, 2022
Net (loss) income$(731,813)$15,775 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization129,256 107,628 
Goodwill impairment850,970 — 
Trade name impairment— 125,450 
Equity-based compensation expense9,730 12,159 
Loss on foreign denominated transactions3,706 30,490 
Gain on foreign currency derivatives(3,704)(2,981)
Loss (gain) on sale and disposal of businesses, fixed assets, and sale-leaseback transactions1,730 (12,183)
Reclassification of interest rate hedge to income(1,358)— 
Bad debt expense1,244 1,011 
Asset impairment costs117,450 2,910 
Amortization of deferred financing costs and bond discounts6,287 6,807 
Benefit for deferred income taxes(134,266)(38,216)
Other, net24,432 15,620 
Changes in assets and liabilities, net of acquisitions:
Accounts and notes receivable, net2,464 (40,296)
Inventory(12,531)(17,898)
Prepaid and other assets(3,909)850 
Advertising fund assets and liabilities, restricted(10,923)(4,612)
Other Assets(29,210)(3,767)
Deferred commissions658 917 
Deferred revenue1,961 2,222 
Accounts payable24,913 (12,321)
Accrued expenses and other liabilities(29,442)(59,844)
Income tax receivable(5,612)37,931 
Cash provided by operating activities212,033 167,652 
Cash flows from investing activities:
Capital expenditures(482,633)(276,222)
Cash used in business acquisitions, net of cash acquired(53,641)(652,085)
Proceeds from sale-leaseback transactions172,230 150,112 
Proceeds from sale or disposal of businesses and fixed assets2,837 6,427 
Cash used in investing activities(361,207)(771,768)
Cash flows from financing activities:
Repayment of long-term debt(20,969)(15,772)
Proceeds from revolving lines of credit and short-term debt335,000 300,000 
Repayments of revolving lines of credit and short-term debt(120,000)— 
Repayment of principal portion of finance lease liability(2,020)(2,229)
Share repurchases(49,956)— 
Stock option exercises6,117 651 
Other, net(322)(70)
Cash provided by financing activities147,850 282,580 
8

Effect of exchange rate changes on cash365 (7,705)
Net change in cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted(959)(329,241)
Cash and cash equivalents, beginning of period227,110 523,414 
Cash included in advertising fund assets, restricted, beginning of period32,871 38,586 
Restricted cash, beginning of period792 792 
Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, beginning of period260,773 562,792 
Cash and cash equivalents, end of period211,280 190,373 
Cash included in advertising fund assets, restricted, end of period47,877 42,386 
Restricted cash, end of period657 792 
Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, end of period$259,814 $233,551 
Supplemental cash flow disclosures - non-cash items:
Capital expenditures included in accrued expenses and other liabilities$24,855 $8,539 
Deferred consideration included in accrued expenses and other liabilities9,275 32,179 
Supplemental cash flow disclosures - cash paid for:
Interest$120,261 $78,572 
Income taxes18,586 9,184 






























The accompanying notes are an integral part of these unaudited consolidated financial statements.
9

DRIVEN BRANDS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


Note 1—Description of Business
Description of Business
Driven Brands Holdings Inc. together with its subsidiaries (collectively, the “Company”) is a Delaware corporation and is the parent holding company of Driven Brands, Inc. and Shine Holdco (UK) Limited (collectively, “Driven Brands”). Driven Brands is the largest automotive services company in North America with a growing and highly-franchised base of approximately 5,000 franchised, independently-operated, and company-operated locations across 49 U.S. states and 13 other countries. The Company has a portfolio of highly recognized brands, including Take 5 Oil Change®, Take 5 Car Wash®, Meineke Car Care Centers®, MAACO®, CARSTAR®, Auto Glass Now®, and 1-800-Radiator & A/C® that compete in the automotive services industry. Approximately 74% of the Company’s locations are franchised or independently-operated.
Tax Receivable Agreement
The Company expects to be able to utilize certain tax benefits which are related to periods prior to the effective date of the Company’s IPO and are attributed to current and former shareholders. The Company previously entered into a tax receivable agreement which provides our pre-IPO shareholders with the right to receive payment of 85% of the amount of cash savings, if any, in U.S. and Canadian federal, state, local, and provincial income tax that the Company will actually realize. The tax receivable agreement was effective as of the date of the Company’s IPO. The Company recorded a current tax receivable liability of $55 million and $53 million as of September 30, 2023 and December 31, 2022, respectively, and a non-current tax receivable liability of $118 million as of September 30, 2023 and December 31, 2022, on the consolidated balance sheets.
Note 2— Summary of Significant Accounting Policies
Fiscal Year
The Company operates and reports financial information on a 52- or 53-week year with the fiscal year ending on the last Saturday in December and fiscal quarters ending on the 13th Saturday of each quarter (or 14th Saturday when applicable with respect to the fourth fiscal quarter). The three and nine months ended September 30, 2023 and September 24, 2022, each consisted of 13 weeks and 39 weeks, respectively. The Car Wash segment is currently consolidated based on a calendar month end.
Basis of Presentation
The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the unaudited interim financial data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results of operations, balance sheet, cash flows, and shareholders’/members’ equity for the interim periods presented. The adjustments include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended December 31, 2022. Certain information and note disclosures normally included in the unaudited financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The results of operations for the three and nine months ended September 30, 2023 may not be indicative of the results to be expected for any other interim period or the year ending December 30, 2023.
During the third quarter ending September 30, 2023, the Company began depreciating construction in progress relating to stores opened and placed into service during the fourth quarter of 2022 and the first half of 2023. The Company recorded an additional $4 million of depreciation expense for these assets in the three months ended September 30, 2023, of which less than $2 million related to each of the three months ended April 1, 2023 and July 1, 2023, respectively, and less than $1 million related to the year ended December 31, 2022. The Company evaluated the impact of the error and out-of-period adjustment and concluded it was not material to any previously issued interim or annual consolidated financial statements and the adjustment is not expected to be material to the year ending December 30, 2023.
Certain prior year amounts have been reclassified to conform to current year presentation.
10

Use of Estimates    
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the unaudited consolidated financial statements and the related notes to the unaudited consolidated financial statements. Significant items that are subject to estimates and assumptions include, but are not limited to, valuation of intangible assets and goodwill; income taxes; allowances for credit losses; valuation of derivatives; self-insurance claims; and stock-based compensation. Management evaluates its estimates on an ongoing basis and may employ outside experts to assist in its evaluations. Changes in such estimates, based on historical experience, current conditions, and various other additional information, may affect amounts reported in future periods. Actual results could differ due to uncertainty inherent in the natures of these estimates.
Shares Repurchased
We record shares repurchased on their trade date and reduce shareholders’ equity and increase accounts payable. Shares repurchased are retired, and the excess of repurchase price over the par value of the shares is charged to retained earnings.
Fair Value of Financial Instruments
Financial assets and liabilities are categorized, based on the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to the quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. Observable market data, when available, is required to be used in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.
The Company classifies and discloses assets and liabilities carried at fair value in one of the following three categories:
Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;
Level 2: Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; or
Level 3: Inputs are unobservable inputs for the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.
Financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022 are summarized as follows:
Items Measured at Fair Value at September 30, 2023
(in thousands)Level 1Level 2Total
Mutual fund investments held in rabbi trust$— $— $— 
Derivative assets, recorded in prepaid and other assets— 215 215 
Derivative assets, recorded in other assets— 2,804 2,804 
Derivative liabilities, recorded in accrued expenses and other liabilities— 260 260 
Items Measured at Fair Value at December 31, 2022
(in thousands)Level 1Level 2Total
Mutual fund investments held in rabbi trust$758 $— $758 
Derivative assets, recorded in prepaid and other assets— 158 158 
Derivative assets, recorded in other assets— 2,148 2,148 
Derivative liabilities, recorded in accrued expenses and other liabilities— 5,005 5,005 

The fair value of the Company’s foreign currency derivative instruments is derived from valuation models, which use Level 2 observable inputs such as quoted market prices, interest rates, and forward yield curves.
The carrying value and estimated fair value of total long-term debt were as follows:
11

September 30, 2023December 31, 2022
(in thousands)Carrying valueEstimated fair valueCarrying valueEstimated fair value
Long-term debt$2,945,675 $2,691,397 $2,784,175 $2,477,456 
Recently Issued Accounting Standards
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates and, particularly, the risk of cessation of LIBOR, regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. The ASU provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. This guidance is effective immediately and the amendments may be applied prospectively through December 31, 2024. On June 2, 2023, the Company entered into a loan amendment to transition our LIBOR-based loans to the Secured Overnight Financing Rate (“SOFR”). The amendment went into effect on July 1, 2023 and did not have a material impact on the loans affected.
Note 3—Acquisitions and Dispositions
The Company strategically acquires companies and assets to increase its footprint and offer products and services that diversify its existing offerings, primarily through asset purchase agreements. These acquisitions are accounted for as business combinations using the acquisition method, whereby the purchase price is allocated to the assets acquired and liabilities assumed, based on their fair values as of the date of the acquisition with the remaining amount recorded in goodwill.
2023 Acquisitions
The Company completed five acquisitions in the Maintenance segment during the nine months ended September 30, 2023, representing five sites. The aggregate cash consideration for these acquisitions, net of cash acquired and liabilities assumed, was approximately $8 million.
The Company completed three acquisitions in the Car Wash segment during the nine months ended September 30, 2023, representing four sites. The aggregate cash consideration for these acquisitions, net of cash acquired and liabilities assumed, was approximately $15 million.
The Company completed two acquisitions in the Paint, Collision & Glass segment during the nine months ended September 30, 2023, representing two sites. The aggregate cash consideration for these acquisitions, net of cash acquired and liabilities assumed, was approximately $6 million.
The Company estimated the fair value of acquired assets and liabilities as of the date of acquisition based on information currently available. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period. The provisional amounts for assets acquired and liabilities assumed for the 2023 acquisitions are as follows:
12

Maintenance Segment
(in thousands)Maintenance
Assets:
Operating lease right-of-use assets$2,678 
Property and equipment, net3,805 
Goodwill3,759 
Deferred tax asset10 
Assets acquired10,252 
Liabilities:
Accrued expenses and other liabilities179 
Operating lease liabilities2,476 
Total liabilities assumed2,655 
Cash consideration, net of cash acquired7,206 
Deferred consideration390 
Total consideration, net of cash acquired$7,596 
Car Wash Segment
(in thousands)Car Wash
Assets:
Operating lease right-of-use assets$1,249 
Property and equipment, net11,181 
Goodwill4,125 
Assets acquired16,555 
Liabilities:
Accrued expenses and other liabilities11 
Deferred tax liability6 
Operating lease liabilities1,220 
Total liabilities assumed1,237 
Cash consideration, net of cash acquired15,293 
Deferred consideration25 
Total consideration, net of cash acquired$15,318 
Paint, Collision & Glass Segment
(in thousands)Paint, Collision & Glass
Assets:
Inventory$35 
Property and equipment, net667
Goodwill4,889 
Deferred tax asset51 
Assets acquired5,642 
Cash consideration, net of cash acquired4,947 
Deferred consideration695 
Total consideration, net of cash acquired$5,642 
Goodwill represents the excess of the consideration paid over the fair value of net assets acquired and includes the expected benefit of synergies within the existing segments and intangible assets that do not qualify for separate recognition. Goodwill,
13

which was allocated to the Car Wash, Maintenance, and Paint, Collision & Glass segments, is substantially all deductible for income tax purposes.
Deferred Consideration and Transaction Costs
Deferred consideration is typically paid six months to one-year after the acquisition closing date once all conditions under the purchase agreement have been satisfied.

Nine Months Ended
(in thousands)September 30, 2023September 24, 2022
Deferred consideration at beginning of period$35,007 $16,000 
Change in accrual1,600 31,470 
Payments(27,332)(15,291)
Deferred consideration at end of period$9,275 $32,179 

The Company incurred less than $1 million and approximately $1 million of transaction costs during the three months ended September 30, 2023 and September 24, 2022, respectively. The Company incurred less than $1 million and approximately $4 million of transaction costs during the nine months ended September 30, 2023 and September 24, 2022, respectively.

2022 Disposition
On March 16, 2022, the Company disposed of its 75% owned subsidiary, IMO Denmark ApS, for consideration of $2 million. As a result of the sale, a $1 million loss was recognized within selling, general, and administrative expenses during the nine months ended September 24, 2022. Also, a noncontrolling interest of less than $1 million was derecognized. The Company allocated less than $1 million of goodwill as part of the sale.
Note 4— Revenue from Contracts with Customers
The Company records contract assets for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year and if such costs are material. Commission expenses, a primary cost associated with the sale of franchise licenses, are amortized to selling, general and administrative expenses in the consolidated statements of operations ratably over the life of the associated franchise agreement.
Capitalized costs to obtain a contract as of September 30, 2023 and December 31, 2022 were $6 million and $7 million, respectively, and are presented within deferred commissions on the consolidated balance sheets. The Company recognized less than $1 million of costs during the three months ended September 30, 2023 and September 24, 2022, respectively, that were recorded as a contract asset at the beginning of the periods. The Company recognized $1 million and less than $1 million of costs during the nine months ended September 30, 2023 and September 24, 2022, respectively, that were recorded as a contract asset at the beginning of the periods.
Contract liabilities consist primarily of deferred franchise fees and deferred development fees. The Company had contract liabilities of $31 million and $29 million as of September 30, 2023 and December 31, 2022, respectively, which are presented within deferred revenue on the consolidated balance sheets. The Company recognized $1 million and less than $1 million of revenue relating to contract liabilities during the three months ended September 30, 2023 and September 24, 2022, respectively. The Company recognized $4 million and $3 million of revenue relating to contract liabilities during the nine months ended September 30, 2023 and September 24, 2022, respectively.
Note 5—Segment Information
The Company’s worldwide operations are comprised of the following reportable segments: Maintenance, Car Wash, Paint, Collision & Glass, and Platform Services.
In addition to the reportable segments, the Company’s consolidated financial results include “Corporate and Other” activity. Corporate and Other incurs costs related to advertising fund revenues and expenses and shared service costs, which are related to finance, information technology, human resources, legal, supply chain, and other support services. Corporate and Other activity includes the adjustments necessary to eliminate intercompany transactions, namely sales by the Platform Services segment to the Paint, Collision & Glass and Maintenance segments.
14

Segment results for the three and nine months ended September 30, 2023 and September 24, 2022 are as follows:
Three months ended September 30, 2023
(in thousands)MaintenanceCar WashPaint,
Collision &
Glass		Platform
Services		Corporate
and Other		Total
Franchise royalties and fees$14,566 $— $23,799 $8,997 $— $47,362 
Company-operated store sales204,46098,132 85,207 1,242 — 389,041 
Independently-operated store sales— 43,582 — — — 43,582 
Advertising fund contributions— — — — 27,121 27,121 
Supply and other revenue25,333 1,099 20,408 45,695 (18,607)73,928 
Total revenue$244,359 $142,813 $129,414 $55,934 $8,514 $581,034 
Segment Adjusted EBITDA$86,493 $24,429 $32,763 $22,417 $(37,487)$128,615 
Three months ended September 24, 2022
(in thousands)MaintenanceCar WashPaint,
Collision &
Glass		Platform
Services		Corporate
and Other		Total
Franchise royalties and fees$11,625 $— $24,055 $9,882 $— $45,562 
Company-operated store sales172,162 98,235 69,383 1,431 — 341,211 
Independently-operated store sales— 40,469 — — — 40,469 
Advertising fund contributions— — — — 22,018 22,018 
Supply and other revenue17,035 1,599 19,782 40,686 (11,768)67,334 
Total revenue$200,822 $140,303 $113,220 $51,999 $10,250 $516,594 
Segment Adjusted EBITDA$68,763 $39,098 $38,919 $19,765 $(36,437)$130,108 
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Nine months ended September 30, 2023
(in thousands)MaintenanceCar WashPaint,
Collision &
Glass		Platform ServicesCorporate
and Other		Total
Franchise royalties and fees$41,224 $— $74,627 $24,831 $— $140,682 
Company-operated store sales605,393 302,193 248,796 3,303 — 1,159,685 
Independently-operated store sales— 157,647 — — — 157,647 
Advertising fund contributions— — — — 73,547 73,547 
Supply and other revenue67,737 4,708 59,952 137,171 (50,777)218,791 
Total revenue$714,354 $464,548 $383,375 $165,305 $22,770 $1,750,352 
Segment Adjusted EBITDA$245,232 $112,001 $109,724 $61,984 $(119,088)$409,853 
Nine months ended September 24, 2022
(in thousands)MaintenanceCar WashPaint,
Collision &
Glass		Platform
Services		Corporate
and Other		Total
Franchise royalties and fees$32,586 $— $69,025 $26,689 $— $128,300 
Company-operated store sales497,638 294,526 161,348 3,975 — 957,487 
Independently-operated store sales— 158,500 — — — 158,500 
Advertising fund contributions— — — — 63,807 63,807 
Supply and other revenue43,645 5,131 57,577 117,704 (38,610)185,447 
Total revenue$573,869 $458,157 $287,950 $148,368 $25,197 $1,493,541 
Segment Adjusted EBITDA$185,324 $148,495 $100,847 $54,471 $(103,922)$385,215 

The reconciliations of Income before taxes to Segment Adjusted EBITDA for the three and nine months ended September 30, 2023 and September 24, 2022 are as follows:
Three Months EndedNine Months Ended
(in thousands)September 30, 2023September 24, 2022September 30, 2023September 24, 2022
(Loss) income before taxes$(951,129)$52,863 $(852,385)$24,367 
Depreciation and amortization45,639 36,518 129,256 107,628 
Interest expense, net41,292 27,323 120,304 78,946 
Acquisition related costs(a)
1,667 2,325 7,264 9,981 
Non-core items and project costs, net(b)
1,486 851 6,113 3,436 
Store opening costs1,372 753 3,774 1,925 
Straight-line rent adjustment(c)
5,193 3,220 14,196 11,530 
Cloud computing amortization(d)
991 — 991 — 
Equity-based compensation expense(e)
2,681 5,308 9,730 12,159 
Foreign currency transaction loss, net(f)
2,980 15,582 3 30,490 
Bad debt expense(g)
— (449)— (449)
Goodwill impairment(h)
850,970 — 850,970 — 
Trade name impairment(i)
— — — 125,450 
Asset sale leaseback (gain) loss, impairment and closed store expenses(j)
125,473 (14,186)119,637 (20,248)
Segment Adjusted EBITDA$128,615 $130,108 $409,853 $385,215 
(a)     Consists of acquisition costs as reflected within the unaudited consolidated statements of operations, including legal, consulting and other fees, and expenses incurred in connection with acquisitions completed during the applicable period, as well as inventory rationalization expenses incurred in connection with acquisitions. We expect to incur similar costs in
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connection with other acquisitions in the future and, under U.S. GAAP, such costs relating to acquisitions are expensed as incurred.
(b)     Consists of discrete items and project costs, including third party consulting and professional fees associated with strategic transformation initiatives as well as non-recurring payroll-related costs.
(c)     Consists of the non-cash portion of rent expense, which reflects the extent to which our straight-line rent expense recognized under U.S. GAAP exceeds or is less than our cash rent payments.
(d) Includes non-cash amortization expenses relating cloud computing arrangements.
(e)     Represents non-cash equity-based compensation expense.
(f)    Represents foreign currency transaction (gains) losses, net that primarily related to the remeasurement of our intercompany loans, which are partially offset by unrealized gains and losses on remeasurement of cross currency swaps and forward contracts.
(g)    Represents the recovery of previously uncollectible receivables outside of normal operations.
(h) Relates to a goodwill impairment within the Car Wash segment. Refer to Note 6 for additional information.
(i)     Certain indefinite lived Car Wash trade names were impaired as the Company elected to discontinue their use. Refer to Note 6 for additional information.
(j)     Relates to (gains) losses, net on sale leasebacks, impairment of certain fixed assets and operating lease right-of-use assets related to closed and underperforming locations, assets held for sale, and lease exit costs and other costs associated with stores that were closed prior to the respective lease termination dates. Refer to Note 6 for additional information.
Note 6 — Asset Impairment Charges
2023 Goodwill and Asset Impairment Charges
During the quarter ended September 30, 2023, management performed a strategic review of the U.S. car wash operations, which included, but was not limited to, an evaluation of the following: store performance, the competitive landscape, revenue and expense optimization opportunities, and capital requirements. As a result of this strategic review, management approved the closure of 29 stores, halted the opening of new company-operated stores, and began marketing property and equipment for sale that will not be utilized by the Company. These actions resulted in impairment charges of $111 million relating to property and equipment, including assets held for sale, and right-of-use assets during the three months ended September 30, 2023 and the transfer of $271 million of assets from property and equipment to assets held for sale on the unaudited consolidated balance sheet as of September 30, 2023. Management expects the sale of these assets to occur over the next twelve months.
As a result of the evaluation performed above, as well as other qualitative and quantitative factors, including a decline in the stock price during the third quarter of 2023, management determined a triggering event had occurred requiring a step one quantitative analysis of the Company’s goodwill and indefinite lived intangible assets. Based on the results of our interim impairment analysis, we concluded the carrying value of the U.S. Car Wash reporting unit exceeded its fair value, and we recorded a full goodwill impairment charge of $851 million during the three months ended September 30, 2023. The fair value of the remaining reporting units exceeded their carrying amounts, indicating no goodwill impairment. The fair values of each reporting unit were determined using a combination of the income approach and market approach valuation methodologies.
The Company will continue to monitor the other reporting units. Reporting units that do not perform in accordance with expectations could result in impairment charges to other reporting units in future periods, including International Car Wash and Maintenance-Repair, primarily comprised of the Meineke brand.
2022 Trade name Impairment Charges
The Company has acquired a number of car wash businesses since 2020. As part of those acquisitions, the Company determined a fair value for each of the associated intangible assets including trade names and customer relationships. During the quarter ended June 25 2022, the Company made the strategic decision to rebrand the majority of its U.S. car wash locations to operate under the name “Take 5 Car Wash”, and therefore discontinued the use of certain car wash trade names that were previously determined to have indefinite lives. Using a projected discounted cash flow analysis based on the relief from royalty method, the fair value of the trade names was determined to be $6 million while their carrying value was $132 million. As a result, the Company recognized a $126 million impairment charge during the nine months ended September 24, 2022, which is reported as trade name impairment charge in the unaudited consolidated statement of operations. The transition will take approximately two and a half years to complete from the date of impairment, and therefore the remaining carrying value is being amortized over 30 months from the date of impairment.
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Note 7 — Long-Term Debt
The Company’s long-term debt obligations consist of the following:
(in thousands)September 30, 2023December 31, 2022
Series 2018-1 Securitization Senior Notes, Class A-2$259,875 $261,938 
Series 2019-1 Securitization Senior Notes, Class A-2285,750 288,000 
Series 2019-2 Securitization Senior Notes, Class A-2264,000 266,063 
Series 2020-1 Securitization Senior Notes, Class A-2169,313 170,625 
Series 2020-2 Securitization Senior Notes, Class A-2437,625 441,000 
Series 2021-1 Securitization Senior Notes, Class A-2441,000 444,375 
Series 2022-1 Securitization Senior Notes, Class A-2361,350 364,088 
Term Loan Facility492,500 496,250 
Revolving Credit Facility215,000 — 
Other debt (a)
19,262 51,836 
Total debt2,945,675 2,784,175 
Less: unamortized debt issuance costs(36,747)(45,908)
Less: current portion of long-term debt(31,869)(32,986)
Total long-term debt, net$2,877,059 $2,705,281 
(a) Consists primarily of finance lease obligations.
Series 2019-3 Variable Funding Securitization Senior Notes
In December 2019, Driven Brands Funding, LLC (the “Issuer”) issued Series 2019-3 Variable Funding Senior Notes, Class A-1 (the “2019 VFN”) in the revolving amount of $115 million. The 2019 VFN have a final legal maturity date in January 2050. The commitment under the 2019 VFN were set to expire in July 2022, with the option of three one-year extensions. In July 2023, the Company exercised the first of three one-year extension options. The 2019 VFN are secured by substantially all assets of the Issuer and are guaranteed by the Securitization Entities. As of July 1, 2023, borrowings will incur interest at the Base Rate plus an applicable margin or Secured Overnight Financing Rate (“SOFR”) plus an applicable term adjustment. No amounts were outstanding under the 2019 VFN as of September 30, 2023 and no borrowings or repayments were made during the nine months ended September 30, 2023. As of September 30, 2023, there were $25 million of outstanding letters of credit which reduced the borrowing availability under the 2019 VFN.
Driven Holdings Revolving Credit Facility
In May 2021, Driven Holdings, LLC, (“the Borrower”) a Delaware limited liability company and indirect wholly-owned subsidiary of Driven Brands Holdings Inc., entered into a credit agreement to secure a revolving line of credit with a group of financial institutions (“Revolving Credit Facility”), which provides for an aggregate amount of up to $300 million, and has a maturity date in May 2026 (“Credit Agreement”). On June 2, 2023, the Credit Agreement was amended pursuant to which as of July 1, 2023, borrowings will incur interest at the Base Rate plus an applicable margin or SOFR plus an applicable term adjustment. The Revolving Credit Facility also includes periodic commitment fees based on the available unused balance and a quarterly administrative fee.
There was $215 million outstanding on the Revolving Credit Facility as of September 30, 2023 with $335 million of borrowings and $120 million of repayments made during the nine months ended September 30, 2023.
The Company’s debt agreements are subject to certain quantitative and qualitative covenants. As of September 30, 2023, the Company and its subsidiaries were in compliance with such covenants.
Note 8 — Leases
During the nine months ended September 30, 2023, the Company sold ten maintenance and 38 car wash properties in various locations throughout the United States for a total of $171 million, resulting in a net gain of $25 million. Concurrent with the closing of these sales, the Company entered into various operating lease agreements pursuant to which the Company leased back the properties. These lease agreements have initial terms of 16 to 20 years. The Company does not include option periods in its determination of the lease term unless renewals are deemed reasonably certain to be exercised. The Company recorded an
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operating lease right-of-use asset and operating lease liability of $132 million and $132 million, respectively, related to these lease arrangements as of September 30, 2023.
During the nine months ended September 24, 2022, the Company sold seven maintenance and 30 car wash properties in various locations throughout the United States for a total of $156 million, resulting in a net gain of $18 million. Concurrent with the closing of these sales, the Company entered into various operating lease agreements pursuant to which the Company leased back the properties. These lease agreements have initial terms of 15 years to 20 years. The Company does not include option periods in its determination of the lease term unless renewals are deemed reasonably certain to be exercised. The Company recorded an operating lease right-of-use asset and operating lease liability of $121 million and $121 million, respectively, related to these lease arrangements as of September 24, 2022.
The Company impaired $62 million of right-of-use assets relating to 28 leased stores that were approved for closure or underperforming during the three months ending September 30, 2023. Refer to Note 6 for additional information.
Supplemental cash flow information related to the Company’s lease arrangements for the nine months ended September 30, 2023 and September 24, 2022, respectively, was as follows:
Nine Months Ended
(in thousands)September 30, 2023September 24, 2022
Cash paid for amounts included in the measurement of lease liabilities:
     Operating cash flows used in operating leases$108,232 $86,423 
     Operating cash flows used in finance leases866 1,214 
     Financing cash flows used in finance leases1,056 1,185 
Note 9 — Shareholders’ Equity
In August 2023, the Board of Directors authorized a program to repurchase up to $50 million of the Company’s common stock (the “Share Repurchase Program”). During the three and nine months ended September 30, 2023, the Company repurchased 3,601,694 shares of its common stock for approximately $50 million, at an average price per share of $13.87. All repurchases were made in open market transactions. As of September 30, 2023, the Company has completed the purchase of all shares under the Share Repurchase Program.
Note 10 — Equity-based Compensation
The Company granted new awards during the three months ended September 30, 2023, consisting of 8,142 restricted stock units (“RSUs”). The Company granted new awards during the nine months ended September 30, 2023 consisting of 388,878 RSUs and 647,359 performance stock units (“PSUs”).
Awards are eligible to vest provided that the employee remains in continuous service on each vesting date. Generally, the RSUs vest ratably in three installments on each of the first three anniversaries of the grant date. The PSUs vest after a three-year performance period. The number of PSUs that vest is contingent on the Company achieving certain performance goals, one being a market condition and the other being a performance condition. The number of PSU shares that vest may range from zero to 200% of the original grant, based upon the level of performance. The awards are considered probable of meeting vesting requirements, and therefore, the Company has started recognizing expense.
The fair value of the total RSUs granted during the three months ended September 30, 2023 was less than $1 million. The fair value of the total RSUs, performance based PSUs, and market based PSUs granted during the nine months ended September 30, 2023 were $11 million, $11 million, and $9 million, respectively. The Company based the fair value of the RSUs and performance based PSUs on the Company’s stock price on the grant date.
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The range of assumptions used for issued PSUs with a market condition valued using the Monte Carlo model were as follows:
Nine months ended
September 30, 2023September 24, 2022
Annual dividend yield—%—%
Expected term (years)
2.6 - 2.8
2.4 - 2.8
Risk-free interest rate